Medicare Authorization & CHIP Reauthorization (MACRA)


Medicare Authorization and CHIP Reauthorization (MACRA) Legislation

On April 27, 2016, the Centers for Medicare and Medicaid Services (CMS) released the Merit-based Incentives Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models proposed rule. MIPS and APMs were established under section 101 of the Medicare Authorization and CHIP Reauthorization (MACRA) legislation which also repealed the sustainable growth rate (SGR) and created stable updates for physician annual payment.

In this proposed rule, CMS proposes to sunset the current PQRS, Value Modifier, and EHR Incentive Program as of 2018; components of these programs are carried forward into the new MIPS program which will affect physician payment beginning in 2019. CMS also proposes standards for APMs through which eligible clinicians can become qualified practices (QPs) and earn incentive payments for participation in APMs as specified under the MACRA; these are termed Advanced APMs. Of note, CMS proposed that 2017 be the first performance year for both MIPS and APMs.

Participation in MIPS vs. APMs

CMS estimates that MIPS would distribute payment adjustments to between approximately 687,000 and 746,000 eligible clinicians in 2019, and that the MIPS payment adjustments would be approximately equally distributed between negative adjustments ($833 million) and positive adjustments ($833 million) to MIPS eligible clinicians, to ensure budget neutrality. CMS estimates somewhere between 30,658 and 90,000 eligible clinicians would become QPs through participation in Advanced APMs (avoiding MIPS), and are estimated to receive between $146 million and $429 million in APM Incentive Payments for CY 2019.

Per the law, both positive and negative adjustments would increase over time (2019: 4%; 2020: 5%; 2021: 7%; 2022+: 9%). Additionally, in the first 5 years MIPS would distribute approximately $500 million in exceptional performance payments to MIPS eligible clinicians whose performance exceeds a specified threshold; the bonus payments can be no higher than an additional 10%.

Under MIPS, physicians will receive a composite score based on their performance in four categories, weighted as below for FY 2019:


FY 2019 Weighting: 50%

  • CMS proposes that physicians report six measures, with at least one outcome measure and one cross-cutting measure included


FY 2019 Weighting: 10%

  • CMS proposes to start with existing Medicare Spending per Beneficiary condition and total per capita cost measures for all attributed beneficiaries. Costs are attributed to the individual physician who provided the plurality of services.
  • CMS proposes to use episode groupers addressing 41 clinical conditions (cardiovascular conditions, respiratory conditions, and musculoskeletal conditions predominate). For acute conditions, costs attributed to the MIPS eligible clinicians that bill at least 30 percent of inpatient evaluation and management (IP E&M) visits during the initial treatment, or “trigger event,” that opened the episode. For procedural episodes, costs would be attributed to all MIPS eligible clinicians that bill a Medicare Part B claim with a trigger code during the trigger event of the episode.


FY 2019 Weighting: 15%

  • Clinicians would be rewarded for clinical practice improvement activities such as activities focused on care coordination, beneficiary engagement, and patient safety.
  • Clinicians may select activities that match their practices’ goals from a list of more than 90 options.
  • In addition, clinicians would receive credit in this category for participating in Alternative Payment Models and in Patient-Centered Medical Homes.


FY 2019 Weighting: 25%

  • MIPS eligible clinicians will be required to report on modified Stage 2 and Stage 3 meaningful use requirements.
  • Unlike the existing Meaningful Use program, this category would not require all-or-nothing EHR measurement or quarterly reporting.

Alternative Payment Models

CMS proposed three main criteria for an Advanced APM; clinician participation in such an Advanced APM, with revenue through an Advanced APM meeting a threshold of 25% of Medicare FFS dollars or 20% of Medicare beneficiaries enrolled in performance year 2017, would satisfy the requirement under MACRA to avoid the MIPS program.

The criteria include:

  • EHR Use
  • Quality measures comparable to MIPS
  • Financial risk

A marginal risk rate of at least 30 percent (marginal risk rate meaning the ratio of financial risk to the amount that actual expenditures exceed expected expenditures); and
Total potential risk of at least four percent of the expected expenditures

Physician-Focused Payment Models

A Physician-Focused Payment Model (PFPM) is an APM wherein Medicare is a payer, which includes physician group practices (PGPs) or individual physicians as APM Entities and targets the quality and costs of physician services. CMS proposes to require a PFPM to target physician services and may address such elements as physician behavior or clinical decision-making. APM Entities may be individual eligible clinicians, physician group practices (PGPs), or other entities, depending on the payment model’s design.

CMS proposed three categories of criteria for PFPM; the criteria include:

  • Promote payment incentives for higher-value care, including paying for value over volume and providing resources and flexibility necessary for practitioners to deliver high-quality health care
  • Address care delivery improvements that promote better care
  • Address information enhancements that improve the availability of information to guide decision-making


In this proposed rule, CMS has demonstrated willingness to seek and use stakeholder input to define plans for implementation of MIPS and APMs.  MIPS in particular is very responsive to provider demands, lessening the burden of measure reporting and paring back the number of measures to choose from to move toward outcome and intermediate outcome measures.  The MIPS composite score categories provide flexibility to eligible providers, allowing them to earn points through relaxed EHR use requirements and a broad array of CPIAs.  However, it is important to note that many eligible professionals required to participate in MIPS are relatively immature in meeting quality reporting requirements under existing programs (PQRS, VM); with all reported measures now pay-for-performance, physicians will have to both learn to report and improve performance on measures very quickly with 2017 being the first performance year.

As expected, CMS did narrowly define Advanced APMs such that very few existing models meet the requirements; CMS’s projection for eligible professional participation in MIPS vs APMs reflects this reality, with an extreme majority of eligible professionals expected to be in MIPS for the first year of the programs.  The requirement that eligible professionals take on a marginal risk rate of at least 30 percent (marginal risk rate meaning the ratio of financial risk to the amount that actual expenditures exceed expected expenditures) or a total potential risk of at least four percent of the expected expenditures is high; development of models to meet these requirements will take time.

Only five existing CMMI APMs meet the requirements of an Advanced APM, which require that eligible professionals take on a marginal risk rate of at least 30 percent and a total potential risk of at least four percent of the expected expenditures. For providers to be exempt from MIPS, they would need to record over 25% of Medicare revenue through an Advanced APM.

Advanced APMs based on CMS’ proposed criteria:

  • MSSP Track 2 and Track 3 ACOs
  • Next Generation ACO Model
  • Comprehensive ESRD Care
  • Oncology Care Model 2-sided risk
  • Comprehensive Primary Care Plus

The incentive structures of these programs require eligible professionals to face significant financial risk based on performance, and the time to prepare is limited – 2017 was proposed as the first measurement year.  Physicians will be required to improve quality and manage cost of care in short order, with strategies targeted to reduce healthcare utilization (readmissions, post-acute care utilization) and select lower cost therapeutics potential “quick wins” to focus on.

As ADVI clients review the rule and have questions about the evolving physician payment incentives, your ADVI team can help assess threats and opportunities for your products, evaluating structural pieces of the initiatives (i.e. measures, risk-sharing arrangements, attribution methodologies) to identify and mitigate any threats or develop strategies to leverage new opportunities to improve patient access and uptake of our client’s products.

Specific areas of ADVI offerings include:

  • Assessment of product lines/therapeutic areas and relationship to quality measures
  • Identification of threats to market access and uptake based on quality measures
  • Value-messaging strategies for client products and therapeutics leveraging alignment of quality and cost incentives
  • Assessment of quality measure development opportunities
  • Facilitation of quality measure development
  • Comprehensive cataloguing and assessment of public and private APMs to identify trends, threats, and opportunities to engage with the provider community